ITR filing: Don’t forget to report these critical details in your tax return

ITR filing: Taxpayers, tax professionals, and financial advisers heaved a collective sigh of relief last week when the tax filing deadline was extended to 31 December 2021. But experts say taxpayers should not put their tax returns on the back burner just because the deadline is more than three months away. “The extension gives you enough time to put your tax affairs in order. Utilize this time to correctly calculate your tax liability and pay the tax dues to avoid interest charges,” says Sudhir Kaushik, Co-founder of tax filing portal Taxspanner.com.

Other income to be disclosed in ITR:

In order to be able to compute accurate tax liability, there are some tax rules that all taxpayers should know of. For instance, a lot of people do not report interest incomes in their returns even though it is fully taxable.

Here are some tax rules that one should be aware of while preparing his/her tax return.

New tax regime:

There are now two tax regimes to choose from. Taxpayers can select a tax regime based on their preferences. The new tax regime allows lower tax rates. However, deductions and tax benefits allowed in the old tax regime are not provided.

The taxpayer will have to communicate the selection of tax regime by sending an intimation through Form 10IE to the income tax department before filing the return.

Calculating capital gains

With a large number of retail investors now directly investing in stocks and mutual funds, having capital gains from these assets is quite likely. Worth mentioning here is that long-term capital gains from equities and equity-oriented mutual funds beyond Rs 1 lakh in a year are taxable.

Calculating capital gains is a complicated exercise, not only because you need to maintain records of all transactions but also because of the different tax rates applicable to various instruments. The new tax filing portal was supposed to auto calculate and pre-fill the capital gains and tax in the tax form of an individual. However, that has not happened so taxpayers have to calculate all capital gains on their own and fill in the form. 

Worth mentioning here is the new rule requires details of the scrips, buying price, selling price, and dates of transactions to be mentioned in the return form if the taxpayer has made long-term gains. The tax department has clarified that there is no need to mention scrip-wise details of transactions when reporting short-term gains. However, for investors providing these details won’t be much difficult as all fund houses provide investors a capital gains statement, that mentions all the transactions and gains and losses made during the year. Similarly, most large brokers also provide their clients capital gains statements for their equity investments. 

Don’t miss unlisted shares, foreign assets

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While capital gains from listed shares and mutual funds have to be reported, taxpayers must also declare the unlisted equity shares and foreign assets they hold. Foreign assets held outside India (both as owner and as beneficiary) have to be mentioned in Schedule FA (foreign assets). There are stiff penalties waiting for non-compliance. Undisclosed foreign income or assets are taxed at 30% plus a penalty, which is 300% of the tax payable on the income or value of the undisclosed asset. An additional penalty of Rs 10 lakh may be levied for failure to disclose such foreign assets in the return.